Piotroski F-Score
A nine-point checklist of year-on-year improvements in profitability, leverage and efficiency, scoring financial strength from 0 to 9.
Formula
F-Score = sum of nine binary tests across profitability (4), leverage and liquidity (3), and operating efficiency (2)
Unit
ratio (x, times)
In depth
Each test scores one point if passed: positive net income, positive operating cash flow, rising return on assets, operating cash flow exceeding net income, falling leverage, rising current ratio, no new shares issued, rising gross margin, and rising asset turnover. The design is deliberately about direction rather than level, which is why it was built to separate genuinely improving companies from statistically cheap but deteriorating ones. Scores of 8 or 9 indicate broad improvement and 0 to 2 indicate broad deterioration. Its limitation is that a single year of change can be noise, and a company can score highly while remaining a poor business in absolute terms.
Worked example
A company posts positive profit and cash flow, rising return on assets, cash flow above profit, falling leverage, a better current ratio, no share issue, but falling gross margin and flat asset turnover. That is 7 out of 9 — improving, with the margin failure worth a look.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Piotroski F-Score” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.